* * * * PUBLIC NOTICE * * * *

Transcription

1 * * * * PUBLIC NOTICE * * * * NOTICE OF AN EMPLOYEE BENEFITS TRUST BOARD MEETING OF THE CITY OF CORINTH August 24, :40 P.M. CITY HALL CORINTH PARKWAY NOTICE IS HEREBY GIVEN of a Regular Session of Corinth Employee Benefits Trust Board to be held at Corinth City Hall located at 3300 Corinth Parkway, Corinth, Texas. The agenda is as follows: CALL TO ORDER, INVOCATION, PLEDGE OF ALLEGIANCE & TEXAS PLEDGE: "Honor the Texas Flag; I pledge allegiance to thee, Texas, one state under God and indivisible". CITIZENS COMMENTS In accordance with the Open Meetings Act, the Board is prohibited from acting on or discussing (other than factual responses to specific questions) any items brought before them at this time. Citizen's comments will be limited to 3 minutes. Comments about any of the agenda items are appreciated by the Board and may be taken into consideration at this time or during that agenda item. Please complete a Public Input form if you desire to address the Board. All remarks and questions addressed to the Board shall be addressed to the Board as a whole and not to any individual member thereof.* Section B Code of Ordinance of the City of Corinth. BUSINESS AGENDA: 1. Consider and approve the Declaration of Trust. 2. Consider and approve the adoption of the City of Corinth Investment Policy as the Investment Policy for the City of Corinth Employee Benefits Trust. 3. Consider and approve the designation of the depository for the City of Corinth Employee Benefits Trust as the same depository utilized by the City of Corinth. 4. Consider and approve the designation of certain signatories for the City of Corinth Employee Benefits Trust. 5. Consider and approve the authorization of the annual auditors for the City of Corinth to conduct an audit for the City of Corinth Employee Benefits Trust. 6. Consider and act on the acceptance of BlueCross BlueShield of Texas' proposal for City s employee medical insurance benefits for FY

2 BOARD COMMENTS & FUTURE AGENDA ITEMS The purpose of this section is to allow each Board member the opportunity to provide general updates and/or comments to fellow Board members, the public, and/or staff on any issues or future events. Also, in accordance with Section of the Code of Ordinances, at this time, any Board member may direct that an item be added as a business item to any future agenda. CLOSED SESSION The Board will convene in such executive or (closed) session to consider any matters regarding any of the above listed agenda items as well as the following matters pursuant to Chapter 551 of the Texas Government Code. Section (1) Private consultation with its attorney to seek advice about pending or contemplated litigation; and/or settlement offer; and/or (2) a matter in which the duty of the attorney to the government body under the Texas Disciplinary Rules of Professional Conduct of the State of Texas clearly conflicts with chapter 551. Section To deliberate the purchase, exchange, lease or value of real property if deliberation in an open meeting would have a detrimental effect on the position of the governmental body in negotiations with a third person. Section To deliberate the appointment, employment, evaluation, reassignment, duties, discipline, or dismissal of a public officer or employee; or to hear a complaint or charge against an officer or employee. Section To deliberate or discuss regarding commercial or financial information that the governmental body has received from a business prospect that the governmental body seeks to have locate, stay, or expand in or near the territory of the governmental body and with which the governmental body is conducting economic development negotiations; or to deliberate the offer of a financial or other incentive to a business prospect. After discussion of any matters in closed session, any final action or vote taken will be in public by the Board. The Board shall have the right at any time to seek legal advice in Closed Session from its Attorney on any agenda item, whether posted for Closed Session or not. RECONVENE IN OPEN SESSION TO TAKE ACTION, IF NECESSARY, ON CLOSED SESSION ITEMS. ADJOURN Posted this 18th day of August, 2017 at 11:30 a.m. on the bulletin board at Corinth City Hall. Kimberly Pence Kimberly Pence, City Secretary City of Corinth, Texas 2

3 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: Health Insurance Benefits Trust BUSINESS ITEM 1. Submitted For: Bob Hart, City Manager Submitted By: Lee Ann Bunselmeyer, Director City Manager Review: Approval: Bob Hart, City Manager AGENDA ITEM Consider and approve the Declaration of Trust. AGENDA ITEM SUMMARY/BACKGROUND The City offers and provides various employee benefits to its employees, including health, dental, and life insurance, and disability benefits. Chapter 222 of the Texas Insurance Code imposes a tax upon the receipt of gross premiums and revenues associated with such benefits provided by the City. Section (c)(5) of the Texas Insurance Code exempts from taxation premiums or revenues paid on group health, accident, and life policies or contracts in which the group covered by the policy or contract consists of a single nonprofit trust established to provide coverage primarily for employees of a municipality. Creation of a nonprofit Employee Benefits Trust does not change the benefits provided by the City, but does lower the cost of providing such benefits. The Employee Benefits Trust is governed by a board of trustees consisting of the Mayor and City Council Members. The Employee Benefits Trust was created on August 10, The City can anticipate an annual reduction of up to 1.75% of its employee insurance premiums from avoidance of state taxes on such premiums. RECOMMENDATION Staff recommends that the Board approves the Declaration of Trust. Resolution/Declaration of Trust Attachments 3

4 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CORINTH, TEXAS, AUTHORIZING CREATION OF AN EMPLOYEE BENEFITS TRUST; DESIGNATING ALL MEMBERS OF THE CITY COUNCIL TO BE TRUSTEES OF SAID TRUST; AUTHORIZING THE TRUST TO PURCHASE VARIOUS FORMS OF INSURANCE FOR THE BENEFIT OF CITY OFFICERS, EMPLOYEES, QUALIFIED RETIREES, AND THEIR DEPENDENTS; AND APPROVING A TRANSFER OF ASSETS TO THE TRUST WHEREAS, the City of Corinth, Texas (the City ) provides or offers various employee benefits to its employees, including health, dental, and life insurance, and disability benefits; and WHEREAS, Chapter 222 of the Texas Insurance Code, imposes a tax upon the receipt of gross premiums and revenues associated with such benefits; and WHEREAS, Section (c)(5) of the Texas Insurance Code authorizes the exemption of such premiums and revenues from state law, provided that the City establishes and maintains the fund under the ownership and control of a single, nonprofit trust; and WHEREAS, the City Council of the City finds it to be in the public interest to authorize the creation of an Employee Benefits Trust for the reasons provided above; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORINTH, TEXAS: Section 1. The City Council hereby authorizes creation of an Employee Benefits Trust and approves the Declaration of Trust in substantially the form attached hereto as Exhibit A and incorporated herein for all purposes, designates all members of the City Council to be Trustees of said Trust, and authorizes the Trust to purchase various forms of insurance for the benefit of City officers, employees, qualified retirees, and their dependents, and as Settlor of said Trust, approves the initial transfer of the City assets as set out in Schedule 1 of the Declaration of Trust. PASSED, APPROVED, AND RESOLVED this day of, Bill Heidemann, Mayor ATTEST: Kim Pence, City Secretary 4

5 EXHIBIT A DECLARATION OF TRUST I. CREATION OF TRUST The City of Corinth, Texas ( City ), as Settlor or creator of the trust, designates the members of the City of Corinth City Council to be Trustees and declares that the City holds in trust the funds described in Schedule A attached hereto and incorporated herein by reference, which is the property of the City, and all substitutions and additions to such funds, for the purpose of providing or offering, whether now or possible in the future, life, disability, sick, accident, and other health benefits to the City s officers, employees, and qualified retirees and their dependents. II. PURPOSE This is a nonprofit trust created for the purpose of providing or offering, whether now or possibly in the future, City officers, employees, and qualified retirees and their dependents with life, disability, sickness, accident, and other health benefits either directly or through the purchase of insurance and to perform operations in furtherance thereof. The Trust is intended to qualify as a tax-exempt trust performing an essential government function within the meaning of Section 115 of the Internal Revenue Code (the Code ). III. DURATION The Trust shall continue until terminated by operation of law or by majority vote of the Trustees. IV. TRUSTEES: COMPOSITION, OFFICERS, COMPENSATION, AND MEETINGS A. Composition. The Trustees are the members of the City Council, and each Trustee s term is contemporaneous with his or her term of office as a member of the City Council. Whenever a Trustee ceases to be a member of the City Council, the person succeeding him or her in office will automatically be appointed to serve as a successor Trustee of the Trust. B. Officers. The Mayor shall serve as Chairman and shall preside at meetings of the Trustees and shall have all such other powers as are conferred herein or by majority vote of the Trustees at a duly called meeting at which a quorum is present. The Mayor Pro Tem shall serve as Vice Chairman and shall preside at meetings of the Trustees whenever the Chairman is absent. The Secretary shall rotate, coinciding with the City s fiscal year, between the Council members based upon their designated places, skipping the Mayor Pro Tem and beginning with the Council 2 5

6 member for Place 1. The Secretary will oversee the preparation of meeting agenda, giving notice of meetings to the Trustees, and the minutes of the meetings of the Trustees. C. Compensation. The Trustees shall be reimbursed for all reasonable and necessary expenses incurred by them in the performance of their duties and will otherwise receive no compensation for their services as Trustees. D. Meetings. A meeting of the Trustees may be called by the Chairman or on written request to the Chairman by two or more Trustees. Trustees shall have at least three days written notice of any meeting. For purposes of this section, electronic mail notice is written notice. V. RIGHTS, POWERS, AND DUTIES OF TRUSTEES; QUORUM AND VOTING A. Rights, Powers, and Duties. In addition to all other powers and duties conferred on them by this Trust document and imposed or authorized by law, the Trustees shall have the following powers and duties, but only to the extent permissible for a single purpose non-profit trust under Section (c)(5) of the Texas Insurance Code: 1. The Trustees shall carry out all of the duties necessary for the proper operation and administration of the Trust on behalf of the covered persons and shall have all the powers necessary and desirable for the effective administration of the affairs of the Trust. 2. The Trustees have the general power to make and enter into all contract, leases, and agreements necessary or convenient to carry out any of the powers granted by this Trust document or by law or to effectuate the purpose of the Trust. All such contracts, leases, and agreements or any other legal documents herein authorized shall be approved by the Trustees by majority vote at a duly called meeting at which a quorum is present and signed by the Chairman on behalf of the Trust. The Trustees may also designate another Trustee to sign such documents. 3. The Trustees shall use the Trust s funds to accomplish the purpose of the Trust, as described in Section II herein, and to operate and administer the Trust solely in the interest of the covered City officers, employees, and qualified retirees and depends thereof and for the exclusive purpose of providing or offering benefits to such person and defraying the reasonable expenses of administration of the Trust. To this end, the Trustees may purchase life, disability, or accident and health insurance to provide or offer coverage for participating City officers, employees, and qualified retirees and their dependents. The Trustees may also adopt a health benefits plan that covers eligible City officers, employees, and qualified retirees, and their dependents. 4. The Trustees may accept contributions to the Trust funds from any source including contributions from covered persons receiving benefits from the Trust. 3 6

7 5. The Trustees shall be authorized to contract with any qualified organization to perform any of the functions necessary for providing or offering life, disability, sick, accident, and other health benefits, including but not limited to excess loss insurance, stop loss insurance, claims administration, administrative services, and any others services that the Trustees shall deem expedient for the proper operation of the Trust. When required by law or desired by the Trustees, the Trustees shall seek sealed competitive bids or sealed competitive proposals with respect to contracts required to carry out the operation of the Trust and affect the purpose of the Trust. 6. The Trustees shall arrange for the investing of the funds of the Trust so as to keep the same invested according to law and at the best interest rates obtainable for the benefit of the covered persons. The Trustees may hire money managers and shall adopt an investment policy for its own use and that of its agents in making investments. The Trustees shall select a depository for the Trust s funds and provide the proper security for any and all investments. The Trustees shall designate signatories for the Trust s depository accounts. 7. The Trustees may purchase insurance for the Trustees and any other fiduciaries appointed by the Trustee and for the Trust itself to cover liability or losses occurring by reason of the act or omission of anyone or more of the Trustees or any other fiduciary appointed by them. Any insurance purchased by the Trustees must give the insurer recourse against the Trustees or other fiduciaries concerned for breach of any fiduciary obligation or fiduciary duty owed to the Trust. 8. The Trustees shall arrange for proper accounting and reporting procedures for the Trust s funds and shall also provide for an annual audit of the Trust s financial affairs by a certified public accountant. 9. The Trustees may retain legal counsel to represent the Trust and the Trustees in all legal proceedings as well as to advise the Trust and the Trustees on all matters pertaining to the operation and administration of the Trust. 10. The Trustees have the authority to terminate the Trust at any time. 11. Upon termination of the Trust, the Trustees shall provide for the payment of the Trust obligations, debts, losses, and other liabilities and shall provide for the disposition of the remaining Trust funds in accordance with Section IX herein. B. Quorum and Voting. A majority of the Trustees shall constitute a quorum for the transaction of business at any meeting of the Trustees and the vote of a majority of the Trustees present shall be required for approval of any action at such meeting. The vote of such majority of the Trustees as such meeting shall constitute action of the Trustees as a group. VI. 4 7

8 BENEFICIARIES The beneficiaries of the Trust are the City officers, employees, and qualified retirees and their dependents who are covered by a life, disability, sick, accident, or other health benefits plan purchased or adopted by the Trust (also called covered persons herein). Beneficiaries may make contributions to the Trust for use by the Trustees in fulfilling the purposes of the Trust. No beneficiary shall have any claim against the funds or any other property of the Trust. The rights and interest of the beneficiaries are limited to the insurance or health benefits specified in any policy purchased or plan adopted by the Trustees. VII. TRUST FUNDS The Trust funds consist of the funds described in Schedule A hereto as provided by the Settlor to institute this Trust, future contributions by the Settlor, beneficiary contributions, investment income, and any other money or property which shall come into the hands of the Trustees in connection with the administration of the Trust. The funds of the Trust shall not inure to the benefit of, or be distributed to, any private person, except for the payment of necessary costs and benefits described below. The Trustees may use the Trust s funds as follows: 1. To pay on group health, accident and life insurance policies or contracts; 2. To make authorized investments and paying fund management fees from the proceeds of the investment. VII. LIABILITY OF TRUSTEES AND OFFICERS The Trustees shall use ordinary care and reasonably diligence in the exercise of their powers and the performance of their duties hereunder; and they shall not be liable for any mistake of judgment or other action made, taken or omitted by them in good faith, nor for any action taken or omitted by any agent, employee or independent contractor selected with reasonable care; nor for loss incurred through investment of the Trust funds or failure to invest. No Trustee shall be liable for any action taken or omitted by any other Trustee. No Trustee shall be required to give a bond or other security to guarantee the faithful performance of his or her duties hereunder. To the fullest extent permitted by law: (a) the City shall indemnify each Trustee who was, is, or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding ( Proceeding ), any appeal therein, or any inquiry or investigation preliminary thereto, by reason of the fact that the Trustee is or was a Trustee; (b) the City shall pay or reimburse a Trustee for expenses incurred (i) in advance of the final disposition of a Proceeding to which such Trustee was, is or is threatened to be made a party, and (ii) in connection with the Trustee s appearance as a witness or other participant in any Proceeding. IX. AMENDMENT, REVOCATION AND TERMINATION 5 8

9 This Declaration of Trust and the Trust created herein shall terminate when and if required by operation of law. The Trustee shall have the power to amend, modify, terminate or revoke, in whole or in part, this Declaration of Trust and the Trust created herein by majority vote a duly called meeting at which a quorum is present. Notwithstanding the foregoing, the Trustees shall have no power to amend Section II of this Declaration of Trust. Beneficiaries of the Trust shall have no right to amend this Declaration of Trust, and their approval shall nto be a condition or requirement for an authorized amendment by the Trustees. Upon termination of the Trust, the Trustees shall pay all obligations, debts, losses, and other liabilities of the Trust. Thereafter, the Trustees shall first use the remaining trust funds to pay covered claims of persons covered under the City s health benefits plan that may be in effect at the time of termination of the Trust and then, either apply any remaining balance of the funds to provide the benefits described herein or transfer such funds to a success whose income is excluded under Section 115(1) of the Code. Notwithstanding the foregoing, the Trustees, upon termination of the Trust and payment of all Trust obligations may, by vote of a majority of the Trustees, transfer the remaining funds or any portion thereof to the trustees of any trust or trusts established by the City for a substantially similar purpose to be applied for uses substantially similar to those set forth in Section II herein. X. GOVERNING LAW This Declaration of Trust and the Trust created herein shall be construed and governed by the laws of the State of Texas in force from time to time. XI. MISCELLANEOUS Whenever the context so admits and such treatment is necessary to interpret this Declaration of Trust in accordance with its apparent intent, the use herein of the singular shall include the plural, and vice versa, and the use of the feminine, masculine, or neuter gender shall be deemed to include the other genders. The captions or headings above the various Sections of this Declaration of Trust have been included only to facilitate the location of the subjects covered by each Section but shall not be used in construing this Declaration of Trust. If any clause or provision of this Declaration of Trust proves to be or adjudged invalid or void for any reason, such invalid or void clause, provision, or portion shall not affect the whole, but the balance of the provisions hereof shall remain operative and shall be carried into effect insofar as is legally possible. [REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS] 6 9

10 IN WITNESS HEREOF, the undersigned parties have executed this Declaration of Trust, consisting of nine (9) pages and Schedule A attached hereto, on the dates of their respective acknowledgments below. By joining in the execution of this Declaration of Trust, the Trustees acknowledge receipt of the property described in Schedule A, signify acceptance of the Trust created hereunder, and covenant that the Trust will be executed with all due fidelity. This Trust is effective as of the last date of signature below. Bill Heidemann, Mayor, Settlor Date Joe Harrison, Mayor Pro Tem, Trustee Date Sam Burke, Council Member, Trustee Date Scott Garber, Council Member, Trustee Date Lowell Johnson, Council Member, Trustee Date Don Glockel, Council Member, Trustee Date 7 10

11 ACKNOWLEDGMENTS THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Bill Heidemann, Mayor of the City of Corinth, on behalf of Settlor. (SEAL) Notary public in and for the State of Texas My commission expires: THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Joe Harrison, Trustee. (SEAL) Notary public in and for the State of Texas My commission expires: THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Sam Burke, Trustee. (SEAL) Notary public in and for the State of Texas My commission expires: 8 11

12 THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Scott Garber, Trustee. (SEAL) Notary public in and for the State of Texas My commission expires: THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Lowell Johnson, Trustee. (SEAL) Notary public in and for the State of Texas My commission expires: THE STATE OF TEXAS COUNTY OF DENTON This instrument was acknowledged before me on this day of, 2017, by Don Glockel, Trustee. (SEAL) Notary public in and for the State of Texas My commission expires: 9 12

13 SCHEDULE A The following is a list of the assets initially transferred by the City of Corinth, Texas, to the Trust: City of Corinth s first month contributions for Employee and Dependents medical/pharmacy Benefits, life insurance, disability insurance, and accidental death and dismemberment insurance. City of Corinth s Employee and Dependents first month of Plan Year s payroll deductions or contributions for medical/pharmacy benefits, life insurance, disability insurance, and accidental death and dismemberment insurance. 13

14 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: City Investment Policy BUSINESS ITEM 2. Submitted For: Bob Hart, City Manager Submitted By: Lee Ann Bunselmeyer, Director Finance Review: N/A Legal Review: N/A City Manager Review: Bob Hart, City Manager AGENDA ITEM Consider and approve the adoption of the City of Corinth Investment Policy as the Investment Policy for the City of Corinth Employee Benefits Trust. AGENDA ITEM SUMMARY/BACKGROUND In accordance with Public Funds Investment Act, Chapter 2256 of the Texas Government Code, the city is required to adopt a formal written Investment Policy for the investment of public funds. The policy establishes investment parameters and guidelines for the investment program in order to achieve the goals of safety, liquidity, diversification, rate-of-return, and public trust, and designates the authorized investment officer responsible for the daily investment activity by the City. RECOMMENDATION Staff recommends approval of the City of Corinth's Investment Policy as the policy for the Employee Benefits Trust. Investment Policy Attachments 14

15 CITY OF CORINTH, TEXAS INVESTMENT POLICY PREFACE It is the policy of the City of Corinth (the "City") that after allowing for the anticipated cash flow requirements and giving due consideration to the safety and risks of investments, all available funds shall be invested in conformance with these legal and administrative guidelines to obtain a market rate-of-return. Effective cash management is recognized as essential to good fiscal management. An active cash management and investment policy will be pursued to take advantage of investment interest as a viable and material source of revenue for City funds. The City s portfolio shall be designed and managed in a manner responsive to the public trust and shall be invested in conformance with State and Federal Regulations, applicable Bond Resolution requirements, and adopted investment policy. The City will invest public funds in a manner which will provide the maximum security and a market rate-of-return while meeting the daily cash flow demands of the City. The City is required under the Public Funds Investment Act (Chapter 2256 of the Texas Government Code) to adopt a formal written investment policy for the investment of public funds. These policies serve to satisfy the statutory requirement (specifically the Public Funds Investment Act, Chapter 2256 of the Texas Government Code [the Act]) to define, adopt and review a formal investment strategy and policy. 15

16 I. PURPOSE The purpose of this investment policy (the policy ) is to set forth specific investment policy and strategy guidelines for the City in order to achieve the goals of safety, liquidity, rate-of-return, and public trust for all investment activities. II. SCOPE The investment policy shall govern the investment of all financial assets considered to be part of the City and includes the following separately invested funds or fund types: Operating, Reserve, Bond, Special and Capital Project Funds and any other funds which have been contractually delegated to the City for management purposes. The City may add or delete funds as may be required by law, or for proper accounting procedures. This policy does not include funds governed by approved trust agreements, or assets administered for the benefit of the City by outside agencies under retirement or deferred compensation programs. In addition to this policy, bond funds (including debt service and reserve funds) are governed by bond ordinances and are subject to the provisions of the Internal Revenue Code and applicable federal regulations governing the investment of bond proceeds. The City shall and will maintain responsibility for these funds to the extent required by: Federal and State law; the City Charter; and donor stipulations. III. INVESTMENT OBJECTIVES Funds of the City shall be invested in accordance with all applicable Texas statutes, this policy and any other approved, written administrative procedures. The five objectives of the City s investment activities shall be as follows (in the order of priority): A. Safety - Preservation and safety of Principal. Safety of principal invested is the foremost objective in the investment decisions of the City. Each investment transaction shall seek to ensure the preservation of capital in the overall portfolio. The risk of loss shall be controlled by investing only in authorized securities as defined in this policy, by qualifying the financial institutions with which the City will transact, and by portfolio diversification. Safety is defined as the undiminished return of the principal on the City s investments. B. Liquidity - The investment portfolio shall be managed to maintain liquidity to ensure that funds will be available to meet the City s cash flow requirements and by investing in securities with active secondary markets. Investments shall be structured in such a manner as to provide liquidity necessary to pay obligations as they become due. A security may be liquidated prior to its stated maturity to meet unanticipated cash requirements or to otherwise favorably adjust the City s portfolio. C. Diversification - Investment maturities shall be staggered throughout the budget cycle to provide cash flow based on the anticipated needs of the City. Diversifying the appropriate maturity structure will reduce market cycle risk. D. Market Rate-of-Return (Yield) - The City s investment portfolio shall be designed to optimize a market rate-of-return on investments consistent with risk constraints and cash flow requirements of the portfolio. The investment portfolio shall be managed in a manner which seeks to attain a market rate-of-return throughout budgetary and 16

17 economic cycles. The City will not attempt to consistently attain an unrealistic above market rate-of-return, as this objective will subject the overall portfolio to greater risk. Therefore, the City s rate-of-return objective is secondary to those of safety and liquidity. Rate-of-return (yield) is defined as the annual income returned on an investment, expressed as a percentage. E. Public Trust - The Investment Officer(s) shall avoid any transactions that might impair public confidence in the City s ability to govern effectively. The governing body recognizes that in diversifying the portfolio, occasional measured losses due to market volatility are inevitable, and must be considered within the context of the overall portfolio s investment return, provided that adequate diversification has been implemented. The prudence of the investment decision shall be measured in accordance with the tests set forth in Section (b) of the Act. IV. INVESTMENT STRATEGY The City maintains a comprehensive and proactive cash management program which is designed to monitor and control all City funds to ensure maximum utilization and yield a market rate-of-return. The basic and underlying strategy of this program is that all of the City s funds are earning interest. It is the responsibility and obligation of the City to maintain a flexible approach and be prepared to modify the investment strategy as market conditions dictate. The investment strategy described is predicated on conditions as they now exist and are subject to change. The investment strategy emphasizes low credit risk, diversification, and the management of maturities. The strategy also considers the expertise and time constraints of the Investment Officers. The allowable investments as defined in Section VII of this policy reflect the avoidance of credit risk. Diversification refers to dividing investments among a variety of securities offering independent returns. This strategy uses local government investment pools to achieve diversification. The active management of maturities refers to structuring the maturity dates of the direct investments so that, while funds are initially invested for a longer period of time, some investments mature as cash needs require. The strategies for the City s investment activities shall be as follows: Strategy No. 1 Diversifying the City s investment opportunities through the use of local government investment pools and money market mutual funds as authorized by the City Council. An investment pool is a professionally managed portfolio of shared assets created to invest public funds jointly on behalf of the governmental entities that participate in the pool and whose investment objectives in order of priority match those objectives of the City. Fund withdrawals are usually available from investment pools on a same-day basis, meaning the pools have a high degree of liquidity. Because of the size and expertise of their staff, investment pools are able to prudently invest in a variety of the investment types allowed by state law. In this manner, investment pools achieve desired diversification. The strategy of the City calls for the use of investment pools as a primary source of diversification and a supplemental source of liquidity. Funds that may be needed on a short-term basis but are in excess of the amount maintained at the depository bank are available for deposit in investment pools. 17

18 Strategy No. 2 Building a ladder of authorized securities with staggered maturities for all or part of the longer-term investable funds. The benefits of this ladder approach include the following: A. It is straight-forward and easily understood; B. It will assure the City that it will capture a reasonable portion of the yield curve; and, C. It provides predictable cash flow with scheduled maturities and reinvestment opportunities. Strategy No. 3 Utilizing the services of a Professional Investment Advisor in order to maximize investment earnings and realize market opportunities when they become available. Other responsibilities of the Investment Advisor include, but are not limited to broker compliance, security selection, competitive bidding, investment reporting, and security documentation. The Investment Advisor must be registered with the Securities and Exchange Commission (SEC) under the Investment Advisor s Act of 1940, as well as, with the Texas State Securities Board and shall adhere to the spirit and philosophy of this policy and avoid recommending or suggesting transactions outside the "Standard of Care" under this policy. Strategy No. 4 The City will utilize five general investment strategies designed to address the unique characteristics of specific fund-types (detailed strategies are presented in Attachment A): A. Investment strategies for operating funds and pooled funds containing operating funds have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The secondary objective is to create a portfolio which will experience minimal volatility during economic cycles. B. Investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date(s). C. Investment strategies for debt service reserve funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate debt service fund. D. Investment strategies for special projects and capital projects funds will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. E. The investment maturity of bond proceeds (excluding reserve and debt service funds) shall generally be limited to the anticipated cash flow requirement or the "temporary period," as defined by Federal tax law. During the temporary period, bond proceeds may be invested at an unrestricted yield. After the expiration of the temporary period, bond proceeds subject to yield restriction shall be invested considering the anticipated cash flow requirements of the funds and market conditions to achieve compliance with the applicable regulations. 18

19 Strategy No. 5 The City generally intends to hold all of its securities until they mature and will accomplish this by maintaining sufficient liquidity in its portfolio so that it does not need to sell a security early. Should it become necessary to sell a security prior to maturity, where the sale proceeds are less than the current book value, the prior written consent of the City Manager must be obtained. Securities may be sold prior to maturity by the Director of Finance at or above their book value at any time, without the consent of the City Manager. Strategy No. 6 All demand deposits of the City will be concentrated with one central depository. The City s depository procedure will maximize the City's ability to pool cash for investment purposes, and provide more manageable banking relationships. In addition, depositories not holding demand deposits of the City may be eligible to bid on City investments. Strategy No. 7 This policy shall further seek to maintain good depository bank relationships while minimizing the cost of banking services. The City will seek to maintain a depository contract which will be managed to a level that minimizes the cost of the banking relationship to the City, while allowing the City to earn an appropriate return on idle demand deposits. Strategy No. 8 A single pooled fund group, as defined in this policy, may be utilized at the discretion of the Investment Officer(s). However, earnings from investments will be allocated on a pro-rata cash basis to the individual funds and used in a manner that will best service the interests of the City. Strategy No. 9 Procedures shall be established and implemented in order to maximize investable cash by decreasing the time between the actual collection and the deposit of receipts, and by the controlling of disbursements. V. FINANCE AUDIT COMMITTEE A. Members - There is hereby created a Finance Audit Committee consisting of the City Manager, Director of Finance, a secondary Investment Officer designated by the Director of Finance, two members of the City Council and two citizens appointed by the City Council by majority vote. B. Scope - The Finance Audit Committee shall meet at least annually to determine general strategies and to monitor results. Included in its deliberations will be such topics as: economic outlook, portfolio diversification, maturity structure, potential risk to the City s funds, authorized brokers and dealers, and the target rate-of-return on the investment portfolio. C. Procedures - The Finance Audit Committee shall provide minutes of its meetings. Any two members of the Finance Audit Committee may request a special meeting, and four members shall constitute a quorum. The Finance Audit Committee shall establish its own rules of procedures. 19

20 VI. RESPONSIBILITY AND STANDARD OF CARE A. The responsibility for the daily operation and management of the City s investments shall be outlined within this section. 1. Delegation of Authority - Management responsibility for the investment program is hereby delegated to the Director of Finance, who shall be authorized to deposit, withdraw, invest, transfer or manage the funds of the City and shall establish written procedures for the operation of the investment program, consistent with this policy. Such procedures shall include explicit delegation of authority to other persons responsible for investment transactions. All persons involved in investment activities will be referred to in this policy as Investment Officers. No persons may engage in investment transactions, except as provided under the terms of this policy and the procedures established by the Director of Finance. 2. The Director of Finance shall assume responsibility for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate Investment Officers. The system of controls shall be designed to provide reasonable assurance that ensures the assets of the City are protected from loss, theft or misuse. The concept of reasonable assurance recognizes that: a. The cost of control should not exceed the benefits likely to be derived; and, b. The valuation of costs and benefits requires estimates and judgments by management. 3. The Director of Finance shall be designated as the primary Investment Officer for the City and shall be responsible for investment decisions and activities under the direction of the City Manager. The Director of Finance may delegate any phase of the investment program to a secondary Investment Officer. Both the Director of Finance and the designated secondary Investment Officer are responsible for daily investment decisions and activities. However, ultimate responsibility for investment decisions will rest with the Director of Finance. B. Prudence - The standard of prudence to be applied by the Investment Officer shall be the prudent investor rule, which states, investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. In determining whether the Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration the following: 1. The investment of all funds over which the Investment Officer had responsibility rather than a consideration as to the prudence of a single investment; and 2. The investment decision was consistent with the written investment policy and procedures of the City. 20

21 C. Due Diligence - The Director of Finance, designated secondary Investment Officer, Mayor, City Council, City Manager, other Finance employees and citizen committee members acting in accordance with written policies and procedures and exercising due diligence, shall not be held personally responsible for a specific security s credit risk or market price changes, provided that these deviations are reported in a timely manner and that appropriate action is taken to control adverse developments. D. Ethical Standards and Conflicts of Interest 1. All City Investment Officials having a direct or indirect role in the investment of City funds shall act as custodians of the public trust avoiding any transaction which might involve a conflict of interest, the appearance of a conflict of interest, or any activity which might otherwise discourage public confidence. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair the ability to make impartial investment decisions. 2. An Investment Officer who has a personal business relationship with the depository bank or with any entity seeking to sell an investment to the City shall file a statement disclosing that personal business interest. 3. An Investment Officer has a personal business relationship with a business organization if: a. The Investment Officer or one related to the Investment Officer within the second degree of affinity or consanguinity owns 10% or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization; b. Funds received by the Investment Officer or one related to the Investment Officer within the second degree of affinity or consanguinity from the business organization exceed 10% of the Investment Officers gross income for the prior year; or c. The Investment Officer or one related to the Investment Officer within the second degree of affinity or consanguinity has acquired from the business organization during the prior year investments with a book value of $2,500 or more for the personal account of the Investment Officer. d. An Investment Officer who is related within the second degree of affinity or consanguinity to an individual seeking to sell an investment to the City shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the City Council. E. Training - The City shall provide periodic training in investments for the investment personnel through courses and seminars offered by professional organizations and associations in order to ensure the quality and capability of the City s investment personnel making investment decisions in compliance with the Public Funds Investment Act (PFIA). The Investment Officers and the Finance Audit Committee members shall attend at least one training session containing at least 10 hours of 21

22 instruction relating to the officer's responsibility under the PFIA within 12 months after assuming duties, and thereafter shall attend at least 8 hours of additional investment training in subsequent two-year periods which begin on the first day of the fiscal year and consist of the two consecutive fiscal years after that date. The Government Finance Officers Association of Texas, the Government Treasurers Organization of Texas, the Texas Municipal League, or the North Central Texas Council of Governments are approved as independent training sources by the City Council. VII. AUTHORIZED INVESTMENTS A. Generally - Safety of principal is the primary objective in investing public funds and can be accomplished by limiting credit risk and interest rate risk. Credit risk is the risk associated with the failure of a security issuer or backer to pay back principal and interest on a timely basis. Interest rate risk is the risk that the value of a portfolio will decline due to an increase in the general level of interest rates. In order to provide for safety of principal as the City s primary objective, only certain investments are authorized as acceptable investments for the City. The following list of authorized investments for the City intentionally excludes some investments authorized by state law. These restrictions are intended to limit possible risk and provide the maximum measure of safety to City funds. In the event an authorized investment loses its required minimum credit rating, all prudent measures will be taken to liquidate said investment. Additionally, the City is not required to liquidate investments that were authorized at the time of purchase. B. Authorized and Acceptable Investments - The authorized list of investment instruments is as follows: 1. Obligations of the United States or its agencies and instrumentalities or any obligation fully guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC), excluding mortgage-backed securities. 2. Direct obligations of the State of Texas, or its agencies and instrumentalities, other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, excluding mortgage-related securities. C. Certificates of Deposit - A certificate of deposit issued by a depository institution that has its main office or branch office in this state, and is secured in accordance with the specific collateralization requirements contained in section XI.B of this policy. In addition, an investment in "bundled" or "shared" CDs made in accordance with the following conditions is permitted: 1. The funds are invested through a broker that has its main office or a branch office in this state selected from a list adopted by the City as required by Section ; or through a depository institution that has its main office or a branch office in this state and that is selected by the City; 2. The selected broker or depository institution arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, 22

23 wherever located, for the account of the City. 3. The full amount of the principal and accrued interest of each of the CD is insured by the United States or an instrumentality of the United States; and 4. The City appoints the depository institution, a clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to SEC Rule 15c3-3, or an entity described in the Public Funds Collateral Act, Section (d), as custodian for the City with respect to those CDs issued for the City's account. D. Eligible Local Government Investment Pools - AAA-rated public funds investment pools, with a weighted average maturity of 60 days or less, individually approved by formal Council resolution, which invest in instruments and follow practices allowed by the current law as defined in Section of the Texas Government Code. The pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one nationally recognized rating service. A public funds investment pool created to function as a money market mutual fund must mark to market daily and, stabilize at a $1 net asset value. E. Repurchase Agreements - Fully collateralized repurchase agreements having a defined termination date, placed through a primary government securities dealer or a financial institution doing business in the State of Texas, and fully secured by cash and obligations of the United States or its agencies and instrumentalities. This collateral must be pledged to the City and held in safekeeping with a third-party custodian approved by the City of Corinth. All collateral must be maintained at a market value of no less than the principal amount of the outstanding funds disbursed. All transactions shall be governed by signed Security Industry and Financial Markets Association, (SIFMA) Master Repurchase Agreement. Repurchase agreements must also be collateralized in accordance with State law as described in Section XI of this policy. Authorization under this section includes flexible repurchase agreements which may be used for specific investment of bond proceeds but shall not include reverse repurchase agreements. F. Bankers Acceptances, and Commercial Paper (LIMITED USE) - These investments are authorized for the City to the extent that they are contained in the portfolios of approved public funds investment pools or money market funds in which the City invests. G. AAA-rated SEC-Regulated 2a7 No-Load Money Market Mutual Funds - An SECregistered, no load money market mutual fund which has a dollar weighted average stated maturity of 60 days or less whose assets consist exclusively of the assets described in section VII.A. and whose investment objectives includes the maintenance of a stable net asset value of $1 for each share: furthermore, it provides the City with a prospectus and other information required by the SEC Act of 1934 or the Investment Advisor Act of 1940 and which provides the City with a prospectus and other information required by the Securities Exchange Act of 1934 (15 USC Section 78a et. Seq.) or the Investment Company Act of 1990 (15 USC Section 80a- 1 et. Seq.). H. Unauthorized Securities - State law specifically prohibits investment in the following 23

24 securities: 1. An obligation whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security and pays no principal. 2. An obligation whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest. 3. Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years. 4. Collateralized mortgage obligations, the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. VIII. DIVERSIFICATION A. Generally - Diversification of investment instruments shall be utilized to avoid incurring unreasonable risks resulting from over-concentration of investments in a specific maturity, a specific issue, or a specific class of securities. With the exception of U.S. Government securities (debt obligations issued by the U. S. Government, its agencies, or instrumentalities) as authorized in this policy, and authorized local government investment pools, no more than forty percent (40%) of the total investment portfolio will be invested in any one security type or with a single financial institution. Diversification of the portfolio considers diversification by maturity dates and diversification by investment instrument. B. Diversification by Maturities - The longer the maturity of investments, the greater their price volatility. Therefore, it is the City s policy to concentrate its investment portfolio in shorter-term securities in order to limit principal risks caused by change in interest rates. The City will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow (including the anticipated cash flow requirements of bond proceeds within the temporary period), the City will not directly invest in securities maturing more than three (3) years from the date of purchase. However, the above described obligations, certificates, or agreements may be collateralized using longer date instruments. The City shall diversify the use of investment instruments to avoid incurring unreasonable risks inherent in overinvesting in specific instruments, individual financial institutions or maturities. Maturity scheduling shall be managed by the Investment Officer so that maturities of investments shall be timed to coincide with projected cash flow needs. The entire City portfolio, or single pooled fund group if utilized, shall maintain a maximum average dollar-weighted maturity, based on the stated maturity date, of less than three hundred sixty five (365) days. Investment maturities for debt service interest and sinking funds and/or other types of reserve funds, whose use is never anticipated, shall maintain a maximum average dollar-weighted maturity, based on the stated maturity date, of less than three hundred sixty-five (365) days. 24

25 C. Diversification by Investment Instrument - Diversification by investment instrument shall not exceed the following guidelines for each type of instrument: Maximum % of Portfolio U.S. Treasury Obligations 100% U.S. Government Agency Securities and Instrumentalities 100% Authorized Local Government Investment Pool 50% Local Government Obligations 10% Fully Collateralized Certificates of Deposit 50% Fully Collateralized Repurchase Agreements 25% SEC-Regulated No-Load Money Market Mutual Fund 50% U.S. Treasury & Agency Callables 30% IX. SECURITY SWAPS Security swaps may be considered as an investment option for the City. A swap out of one instrument into another is acceptable to increase yield, realign for disbursement dates, extend or shorten maturity dates and to improve market sector diversification. Swaps may be initiated by brokers/dealers who are on the City s approved list. A horizon analysis is required for each swap proving benefit to the City before the trade decision is made, which will accompany the investment file for record keeping. X. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS A. The Director of Finance will maintain a list of financial institutions authorized to provide investment services to the City. In addition, a list will also be maintained of approved broker/dealers authorized to provide investment services in the State of Texas. These will include financial institutions that qualify under Securities & Exchange Commission Rule 15-C3-1 (uniform net capital rule). No public deposit shall be made except in a qualified public depository as established by state laws. B. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Director of Finance with the following, as appropriate: audited financial statements, proof of Financial Industry Regulatory Authority certification trading resolution, proof of State registration, completed broker/dealer questionnaire and certification of having read the City s investment policy. C. The Finance Audit Committee shall be responsible for adopting the list of brokers and dealers of government securities. Their selection shall be among only primary government securities dealers that report directly to the New York Federal Reserve Bank, unless a comprehensive credit and capitalization analysis reveals that other firms are adequately financed to conduct public business. The Finance Audit Committee shall base its evaluation of security dealers and financial institutions upon: 25

26 1. Financial conditions, strength and capability to fulfill commitments; 2. Overall reputation with other dealers or investors; 3. Regulatory status of the dealer; 4. Background and expertise of the individual representatives. D. Investment Officers shall only conduct business with securities dealers approved by the Finance Audit Committee and will not purchase investments from any financial organization until the organization s registered principal has executed a written instrument stating that he or she has thoroughly reviewed the City s investment policy and acknowledges that reasonable procedures and controls have been implemented to preclude imprudent investment activities arising out of transactions between the organization and the City, except to the extent that this authorization is dependent on an analysis of the makeup of the City s entire portfolio or requires an interpretation of subjective investment standards. E. To guard against default possibilities under these conditions, and to assure diversification of bidders, business with any one issuer, or investment broker, should be limited to forty percent (40%) of the total portfolio at any point in time. In this way, bankruptcy, receivership or legal action would not immobilize the City s ability to meet payroll or other expenses. F. All investments (governments or bank C.D. s) will be solicited on a competitive basis with at least three (3) institutions. The Finance Audit Committee can approve exceptions on a case by case basis or on a general basis in the form of guidelines. These guidelines shall take into consideration the investment type maturity date, amount, and potential disruptiveness to the City s investment strategy. The investment will be made with the broker/dealer offering the best yield/quality to the City. The quotes may be accepted orally, in writing, electronically, or any combination of these methods. G. An annual review of the financial condition and registrations of qualified financial organizations will be conducted by the Director of Finance. H. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the City invests. I. If the City has contracted with a Registered Investment Advisor for the management of its funds, the advisor shall be responsible for performing due diligence on and maintaining a list of broker/dealers with which it shall transact business on behalf of the City. The advisor shall determine selection criteria and shall annually present a list of its authorized broker/dealers to the City for review and likewise shall execute the aforementioned written instrument stating that the advisor has reviewed the City's investment policy and has implemented reasonable procedures and controls in an effort to preclude imprudent investment activities with the City. The advisor shall obtain and document competitive bids and offers on all transactions and present these to the City as part of its standard trade documentation. 26

27 J. It is the policy of the City that all security transactions entered into with the City shall be conducted on a Delivery-versus-Payment basis through the Federal Reserve System. By doing this, City funds are not released until the City has received, through the Federal Reserve wire, the securities purchased. The City shall authorize the release of funds only after receiving notification from the safekeeping bank that a purchased security has been received in the safekeeping account of the City. The notification may be oral, but shall be confirmed in writing. XI. SAFEKEEPING AND COLLATERALIZATION A. Safekeeping - All securities owned by the City shall be held by a third-party safekeeping agent selected by the City. The collateral for bank deposits will be held in the City s name in the bank s trust department, in a Federal Reserve Bank account in the City s name, or a third-party financial institutions doing business in the state of Texas, in accordance with state law. Original safekeeping receipts shall be obtained and held by the City. The City shall contract with a bank or banks for the safekeeping of securities either owned by the City as part of its investment portfolio or held as collateral to secure time deposits. B. Collateralization - Consistent with the requirements of the Public Funds Collateral Act, it is the policy of the City to require full collateralization of all City funds on deposit with a depository bank. The market value of the investments securing the deposit of funds shall be at least equal to 102% of the amount of the deposits of funds reduced to the extent that the deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Securities pledged as collateral shall be held by an independent third party with whom the City has a current custodial agreement. The agreement is to specify the acceptable investment securities as collateral, including provisions relating to possession of the collateral, the substitution or release of investment securities, ownership of securities, and the method of valuation of securities. The safekeeping agreement must clearly state that the safekeeping bank is instructed to release purchased and collateral securities to the City in the event the City has determined that the depository bank has failed to pay on any matured investments in certificates of deposit, or has determined that the funds of the City are in jeopardy for whatever reason, including involuntary closure or change of ownership. A clearly marked evidence of ownership, e.g., safekeeping receipt, must be supplied to the City and retained by the City. 1. The City may accept the following to insure or collateralize bank deposits: a. Guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor; b. United States Treasuries & Agencies c. Other securities as approved by the Finance Audit Committee 2. For certificates of deposit and other evidences of deposit, collateral shall be at 102% of market value. The market value of collateral will always equal or exceed 102% of the principal plus accrued interest of deposits at financial institutions. 27

28 3. Financial institutions with which the City invests or maintains other deposits shall provide monthly, and as requested by the Investment Officer, a listing of the collateral pledged to the City, marked to current market prices. The listing shall include total pledged securities itemized by name, type, description, par value, current market value, maturity date, and Moody's or Standard & Poor's rating, if applicable. The City and the financial institution shall jointly assume the responsibility for ensuring that the collateral is sufficient. C. Collateralized Deposits - Consistent with the requirements of State law, the City requires all bank deposits to be federally insured or collateralized with eligible securities. Financial institutions serving as City depositories will be required to sign a "Depository Agreement" with the City and the City's safekeeping agent. The collateralized deposit portion of the Agreement shall define the City's rights to the collateral in the event of default, bankruptcy, or closing and shall establish a perfected security interest in compliance with Federal and State regulations, including: 1. Agreement must be in writing; 2. Agreement has to be executed by the Depository and the City contemporaneously with the acquisition of the asset; 3. Agreement must be approved by the Board of Directors or designated committee of the Depository and a copy of the meeting minutes must be delivered to the City; and 4. Agreement must be part of the Depository's "official record" continuously since its execution. XII. INTERNAL CONTROL The Investment Officer shall establish a system of written internal controls, which shall be reviewed annually by independent auditors. The controls shall be designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes, or imprudent actions. The internal controls are to be reviewed annually in conjunction with an external independent audit. This review will provide assurance of compliance with policies and procedures as specified by this policy. The City, in conjunction with its annual financial audit, shall perform a compliance audit of management controls and adherence to the City s established investment policy. XIII. PERFORMANCE The City s investment portfolio shall be designed to obtain a market rate-of-return on investments consistent with risk constraints and cash flow requirements of the City. This investment policy establishes weighted average yield to maturity as the standard portfolio performance measurement. 28

29 XIV. REPORTING A. Quarterly - The Director of Finance shall prepare and submit a signed quarterly investment report to the Finance Audit Committee that summarizes current market conditions, economic developments, and anticipated investment conditions. The report shall summarize investment strategies employed in the most recent quarter and describe the portfolio in terms of investment securities, maturities, risk characteristics, and shall explain the total investment return for the quarter. The City shall also monitor the credit ratings on securities that require minimum ratings. This may be accomplished through staff research, or with the assistance of brokerdealers, investment advisors, banks or safekeeping agents. B. Annual Report - Within 180 days of the end of the fiscal year, the Director of Finance shall present an annual report on the investment program and investment activity. This report may be presented as a component of the fourth quarter report to the City Manager and City Council. The quarterly reports prepared by the Director of Finance shall be formally reviewed at least annually by an independent auditor, and the result of the review shall be reported to the City Council by that auditor. C. Methods - The quarterly and annual investment reports shall include a succinct management summary that provides a clear picture of the status of the current investment portfolio and transactions made over the past quarter. This management summary will be prepared in a manner which will allow the City to ascertain whether investment activities during the reporting period have conformed to the investment policy. The report will be prepared in compliance with generally accepted accounting principles. The report will be provided to the City Council. The report will include the following: 1. A listing of individual securities held at the end of the reporting period. This list will include the name of the fund or pooled group fund for which each individual investment was acquired; 2. Unrealized gains or losses resulting from appreciation or depreciation by listing the beginning and ending book and market value of securities for the period. Market values shall be obtained from financial institutions or portfolio reporting services independent from the broker/dealer from which the security was purchased; 3. Additions and changes to the market value during the period; 4. Fully accrued interest for the reporting period; 5. Average weighted yield to maturity of portfolio on entity investments as compared to applicable benchmarks; 6. Listing of investments by maturity date; 7. The percentage of the total portfolio which each type of investment represents; and 29

30 8. Statement of compliance of the City's investment portfolio with State Law and the investment strategy and policy approved by the City Council. 9. Market yield benchmark comparison of the average 90-day U. S. Treasury Bill auction yield during the reporting period. 10. The guidelines of retaining records for seven years as recommended in the Texas State Library Municipal Records Manual should be followed. The Director of Finance shall oversee the filing and/or storing of investment records. XV. INVESTMENT POLICY ADOPTION AND AMENDMENT The City s investment policy shall be adopted and amended by resolution of the City Council only. The City s written policies and procedures for investments are subject to review not less than annually to stay current with changing laws, regulations and needs of the City. The City Council, not less than annually, shall adopt a written instrument stating that it has reviewed the investment policy and investment strategies and that the written instrument so adopted shall record any changes made to either the policy or strategies. 30

31 Attachment A CITY OF CORINTH, TEXAS Investment Strategy Statement Operating Funds 1. Suitability - Any investment eligible in the investment policy is suitable for Operating Funds. 2. Safety of Principal - All investments shall be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, by managing the weighted average days to maturity for the Operating Fund s portfolio to less than 270 days and restricting the maximum allowable maturity to three years, the price volatility of the overall portfolio will be minimized. 3. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market spreads between the bid and offer prices of a particular security-type of less than a quarter of a percentage point will define an efficient secondary market. 4. Liquidity - The Operating Fund requires the greatest short-term liquidity of any of the Fund types. Short-term investment pools and money market mutual funds will provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. 5. Diversification - Investment maturities should be staggered throughout the budget cycle to provide cash flow based on the anticipated operating needs of the City. Market cycle risk will be reduced by diversifying the appropriate maturity structure out through two years. 6. Yield - Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling three-month treasury-bill portfolio will be the minimum yield objective. Reserve Funds 1. Suitability - Any investment eligible in the investment policy is suitable for Debt Service Reserve Funds. Bond resolution and loan documentation constraints and insurance company restrictions may create specific considerations in addition to the investment policy. 2. Safety of Principal - All investments shall be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, managing Debt Service Reserve Fund maturities to not exceed the call provisions of the borrowing reduces the investment s market risk if the City s debt is redeemed and the Reserve Fund liquidated. The fund shall maintain a maximum average dollar-weighted maturity, based on the stated maturity date, of less than three hundred sixty-five (365) days. No stated final investment maturity shall exceed the shorter of the final maturity of the borrowing or three years. Annual mark-to-market requirements or specific maturity and average life limitations within the borrowing s documentation 31

32 will influence the attractiveness of market risk and reduce the opportunity for maturity extension. 3. Marketability - Securities with less active and efficient secondary markets are acceptable for Debt Service Reserve Funds. 4. Liquidity - Debt Service Reserve Funds have no anticipated expenditures. The Funds are deposited to provide annual debt service payment protection to the City s debt holders. The funds are returned to the City at the final debt service payment. Market conditions and arbitrage regulation compliance determine the advantage of security diversification and liquidity. Generally, if investment rates exceed the cost of borrowing, the City is best served by locking in investment maturities and reducing liquidity. If the borrowing cost cannot be exceeded, then concurrent market conditions will determine the attractiveness of locking in maturities or investing shorter and anticipating future increased yields. 5. Diversification - Market conditions and the arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for Debt Service Reserve Funds. At no time shall the final debt service payment date of the bond issue be exceeded in an attempt to bolster yield. 6. Yield - Achieving a positive spread to the applicable borrowing cost is the desired objective. Debt Service Reserve Fund portfolio management shall at all times operate within the limits of the investment policy s risk constraints. Special Project and Capital Project Funds 1. Suitability - Any investment eligible in the investment policy is suitable for Special Project and Capital Project Funds. 2. Safety of Principal - All investments will be of high quality securities with no perceived default risk. Market fluctuations will however occur, by restricting the maximum maturity to three years, managing the weighted average days to less than 270 days, restricting the maximum allowable maturity to two years, and by managing Special Project and Capital Project Funds to balance the short term and long term anticipated cash flow requirements of the plant or equipment being depreciated, replaced or repaired, the market risk of the Fund portfolio will be minimized. 3. Marketability - The balancing of short-term and long-term cash flow needs requires the short-term portion of the Special Project and Capital Project Funds portfolio to have securities with active and efficient secondary markets. Historical market spreads between the bid and offer prices of a particular security-type of less than a quarter of a percentage point will define an efficient secondary market. Securities with less active and efficient secondary markets are acceptable for the long-term portion of the portfolio. 4. Liquidity - Special Project and Capital Project Funds used as part of a CIP plan or scheduled repair and replacement program are reasonably predictable. However unanticipated needs or emergencies may arise. Selecting Investment maturities that provide greater cash flow than the anticipated needs will reduce the liquidity risk of unanticipated expenditures. 32

33 5. Diversification - Investment maturities should blend the short-term and long-term cash flow needs to provide adequate liquidity and yield enhancement and stability. A barbell maturity ladder may be appropriate. 6. Yield - Attaining a competitive market yield for comparable security-types and portfolio structures is the desired objective. The yield of an equally weighted, rolling six-month treasury-bill portfolio will be the minimum yield objective. Bond Funds 1. Suitability - Any investment eligible in the investment policy is suitable for Bond Funds. 2. Safety of Principal - All investments will be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, by managing Bond Funds to not exceed the shorter of three years or the anticipated expenditure schedule and maintaining a maximum average dollar-weighted maturity, based on the stated maturity date, of less than three hundred sixty-five (365) days the market risk of the overall portfolio will be minimized. 3. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market spreads between the bid and offer prices of a particular security-type of less than a quarter of a percentage point will define an efficient secondary market. 4. Liquidity - Bond Funds used for capital improvements programs have reasonably predictable draw down schedules. Therefore investment maturities should generally follow the anticipated cash flow requirements. Investment pools and money market mutual funds will provide readily available funds generally equal to one month s anticipated cash flow needs, or a competitive yield alternative for short term fixed maturity investments. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a flexible repurchase agreement. 5. Diversification - Market conditions and arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for construction, loan and bond proceeds. Generally, when investment rates exceed the applicable cost of borrowing, the City is best served by locking in most investments. If the cost of borrowing cannot be exceeded, then concurrent market conditions will determine the attractiveness of diversifying maturities or investing in shorter and larger amounts. At no time shall the anticipated expenditure schedule be exceeded in an attempt to bolster yield. 6. Yield - Achieving a positive spread to the cost of borrowing is the desired objective, within the limits of the investment policy s risk constraints. The yield of an equally weighted, rolling six-month treasury-bill portfolio will be the minimum yield objective for non-borrowed funds. 33

34 Attachment B CITY OF CORINTH, TEXAS Investment Policy [SAMPLE] TEXAS PUBLIC FUNDS INVESTMENT ACT CERTIFICATION BY BUSINESS ORGANIZATION This certification is executed on behalf of the City of Corinth, Texas (the "City") and (the Business Organization), pursuant to the Public Funds Investment Act, Chapter 2256, Texas Government Code (the Act ) in connection with investment transactions conducted between the City and the Business Organization. The undersigned Qualified Representative of the Business Organization hereby certifies on behalf of the Business Organization that: 1. The undersigned is a Qualified Representative of the Business Organization offering to enter an investment transaction with the Investor as such terms are used in the Public Funds Investment Act, Chapter 2256, Texas Government Code; and 2. The Qualified Representative of the Business Organization has received and reviewed the investment policy furnished by the City; and 3. The Qualified Representative of the Business Organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the Business Organization and the City that are not authorized by the City's investment policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires an interpretation of subjective investment standards. Qualified Representative of Business Organization Firm: Signature Name: Title: Date: 34

35 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: Bank Depository Agreement BUSINESS ITEM 3. Submitted For: Bob Hart, City Manager Submitted By: Lee Ann Bunselmeyer, Director Finance Review: N/A Legal Review: N/A City Manager Review: Bob Hart, City Manager AGENDA ITEM Consider and approve the designation of the depository for the City of Corinth Employee Benefits Trust as the same depository utilized by the City of Corinth. AGENDA ITEM SUMMARY/BACKGROUND Bank Depository services are currently provided to the City of Corinth by Northstar Bank under a contract term that began June 1, 2014 and expired May 31, 2016, with three possible one-year extensions for 2017, 2018, and Bank Depository services vary from processing the City's deposits and check disbursements to safekeeping individual investment securities. Other services include wire transfers, automated clearing house transactions, positive pay protection, change orders, etc. RECOMMENDATION Staff recommends the designation of the depository for the City of Corinth Employee Benefits Trust as the same depository utilized by the City of Corinth. 35

36 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: Designation of Signatories Submitted For: Lee Ann Bunselmeyer, Director Submitted By: Lee Ann Bunselmeyer, Director City Manager Review: Approval: Bob Hart, City Manager BUSINESS ITEM 4. AGENDA ITEM Consider and approve the designation of certain signatories for the City of Corinth Employee Benefits Trust. AGENDA ITEM SUMMARY/BACKGROUND The following positions are recommended as authorized signatories for the Employee Benefits Trust. For internal control purposes, two signatories are required to execute a transaction for the Employee Benefits Trust. City Manager Director of Finance and Administrative Services Director of Human Resources RECOMMENDATION Staff recommends the designation of the recommended signatories for the Employee Benefits Trust. 36

37 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: Approved auditors BUSINESS ITEM 5. Submitted For: Bob Hart, City Manager Submitted By: Lee Ann Bunselmeyer, Director City Manager Review: Approval: Bob Hart, City Manager AGENDA ITEM Consider and approve the authorization of the annual auditors for the City of Corinth to conduct an audit for the City of Corinth Employee Benefits Trust. AGENDA ITEM SUMMARY/BACKGROUND The City of Corinth is required to have an independent audit of the financial records and Comprehensive Annual Financial Report performed on an annual basis. Current auditing services are provided by Davis Kinard & Co, LLP. The original term of the contract was for September 30, 2015 and September 30, 2016 with the option to extend the contract for three additional years. RECOMMENDATION Staff recommends the authorization of the annual auditors for the City of Corinth to conduct an audit for the City of Corinth Employee Benefits Trust. 37

38 Employee Benefits Trust Board Meeting Meeting Date: 08/24/2017 Title: Blue Cross Blue Shield of Texas Medical Proposal BUSINESS ITEM 6. Submitted For: Bob Hart, City Manager Submitted By: Lee Ann Bunselmeyer, Director Finance Review: Yes Legal Review: N/A City Manager Review: Approval: Bob Hart, City Manger AGENDA ITEM Consider and act on the acceptance of BlueCross BlueShield of Texas' proposal for City s employee medical insurance benefits for FY AGENDA ITEM SUMMARY/BACKGROUND The City of Corinth solicited proposals for the City s employee medical insurance benefits for the fiscal year. Only two qualified proposals for medical insurance benefits were received during the Request for Proposals (RFP) process which closed on June 1, After review and evaluation of benefits and proposed costs, our benefits consultant (IPS Advisors, LLP) initiated negotiations. The renewal with the current carrier (BCBS) represented a 36.20% increase over the rates for the fiscal year (the other respondent s proposal represented a 78.8% increase). After negotiations, the proposal from BlueCross BlueShield of Texas represented a 21% increase. Because the City was financially unable to meet the requirements to remain with the current plan, changes were made to the plan representing a 8.9% increase. The changes include paying co-insurance after the deductible has been met, and a narrower medical network. These rates are guaranteed until September 30, The City anticipates an annual reduction of up to 1.75% of its employee medical insurance premiums on state taxes after establishing the Non-Profit Employee Benefits Trust. BENEFIT The City will offer two High Deductible Health Plans with a Health Savings Account (HSA). Both plans (Base and Buy-Up) will require paying a coinsurance after the deductible has been met. The Base plan will have a narrower medical network. The Buy-Up plan will allow employees to keep the current medical network. Full Time Employees - City funding will continue to be 100% of the employee only coverage of the Base plan premium. City funding for the dependent cost will continue at 75% of the Base plan premiums. The HSA contribution from the City will remain at $1,000 per employee per year. Part Time (0.5 FTE) Employees - City funding for the employee only coverage will continue to be 50% of the Base plan premium. The City funding for the dependent cost will continue to be 0% of the Base plan premiums. The HSA contribution from the City will remain at $500 per employee per year. Above City contributions are regardless of the plan selected by the employee. The medical insurance proposal from BlueCross BlueShield of Texas was approved by the City Council on August 10, RECOMMENDATION Staff recommends acceptance of BlueCross BlueShield of Texas' proposal for City s employee medical insurance benefits for FY

39 Source of Funding: FY Budget Fiscal Impact FINANCIAL SUMMARY: For the City, the proposal represents an 8.9% increase or $207,892 compared to FY budgeted rates for all funds. BlueCross BlueShield of Texas Proposed Rates Attachments 39

40 40

41 41

42 42

43 43

44 44

45 45

46 46

47 47

48 48

49 49

50 50

51 51

52 52

53 53

54 54

55 55

56 56